Thomas Cook announces ‘fundamental’ review as profits fall

12 July 2011

Thomas Cook has launched a “fundamental strategic and operational review” of its UK business as profits continue to fall.

At the close of the third financial quarter the tour operator said profits were some £40 million behind levels recorded last year, with the impact of the ongoing disruption in the Middle East and difficult trading conditions in the UK to blame.

“While we have yet to finalise our third quarter results it has become clear that they will be behind expectations, with our underlying operating profit for the three months to June 30th 2011 likely to be around £20m, which is £5m lower than the comparable prior year period,” explained a statement to markets this morning.

Thomas Cook’s French business in particular is seeing further reduced demand and lower margins during peak season due to the continuing unrest in Egypt, Tunisia and Morocco.

Following the profit warning shares in Thomas Cook plunged by up to 30 per cent on the London Stock Exchange this morning, falling to 87 pence per share.

UK trading has also been hit, with weaker consumer confidence affecting sales.

“The profitability of our UK business continues to be impacted by the difficult trading conditions, mainly as a result of the continued squeeze on UK consumers’ disposable income,” explained Thomas Cook.

An overhaul of the business is now on the cards as the tour operator seeks to regain ground.

“As a result, it is now appropriate that we revisit the effectiveness of our UK business model,” added the statement.

“The UK’s new management team, which we announced at the time of the interim results, has begun a fundamental strategic and operational review of the business.”

Thomas Cook now expects to make £320 million in profit for financial 2011, compared to £362.2 million last year.